ch3 understanding financial statements and cash flows

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chapter 3

balance sheet

statement that shows a firms assets, liabilites, & shareholders equity at any given point; snapshot of firms financial position at any given point

cash

cash on hand, demand deposits, & short term marketable secrurites that can be quickly be converted to cash

common stock

shares that represent ownership ina corporation

common stockholders

investors who own the firms common stock; ommon stockholders are the residual owners of the firm

cost of goods sold

cost of producing or acquiring a product or service to be sold in the ordinary course of business

current assets (gross working capital)

consist primarily of cash, marketable securities, accounts receivalble, inventories, & prepaid expenses

current debt (short term liabilites)

due to be paid within 12 months

debt

liabilities consisting of such sources as credit extended by suppliers or a loan from a bank

equity

stockholders' investment in the firm and the cumulative profits retained in the business up to the date of the balance sheet

financing cash flows

cash flows paid to or received from investors and lenders

fixed assets

assets such as equipment, buildings & land

free cash flow

amount of cash available from operations after the firm pays for the investments it has made in operating working capital and fixed assets; this cash is available to distribute to the firms creditors and owners

income statement (profit & loss statement)

a basic accounting statement that measures teh results of a firms operations over a specified period, commonly 1yr; aka 'profit & loss' statement; bottom line shows the firms profit or loss for the period

long term debt

loans from banks or other sources that lend money for longer than 12 months

retained earnings

cumulataive profits retained ina business up to the date of the balance sheet

short term liabilities

same as current debt

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